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Fair Value Measurement (Tables)
 3 Months Ended
Mar. 31, 2016
Fair Value Disclosures [Abstract]  
Information by Credit Spread Type
Information by Credit Spread Type (1)
 
 
As of
March 31, 2016
 
As of
December 31, 2015
Based on actual collateral specific spreads
14
%
 
13
%
Based on market indices
72
%
 
73
%
Provided by the CDS counterparty
14
%
 
14
%
Total
100
%
 
100
%

 ____________________
(1)    Based on par.
Schedule of example effects of change in gross spreads, company's own credit spread and cost to buy protection on the on the Company affect the amount of premium the company can demand for credit protection
 
Scenario 1
 
Scenario 2
 
bps
 
% of Total
 
bps
 
% of Total
Original gross spread/cash bond price (in bps)
185

 
 

 
500

 
 

Bank profit (in bps)
115

 
62
%
 
50

 
10
%
Hedge cost (in bps)
30

 
16
%
 
440

 
88
%
The premium the Company receives per annum (in bps)
40

 
22
%
 
10

 
2
%
Fair Value Hierarchy of Financial Instruments Carried at Fair Value
Fair Value Hierarchy of Financial Instruments Carried at Fair Value
As of March 31, 2016
 
 
 
 
Fair Value Hierarchy
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
(in millions)
Assets:
 

 
 

 
 

 
 

Investment portfolio, available-for-sale:
 

 
 

 
 

 
 

Fixed-maturity securities
 

 
 

 
 

 
 

Obligations of state and political subdivisions
$
5,776

 
$
—

 
$
5,769

 
$
7

U.S. government and agencies
405

 
—

 
405

 
—

Corporate securities
1,525

 
—

 
1,451

 
74

Mortgage-backed securities:
 

 
 
 
 
 
 
RMBS
1,239

 
—

 
879

 
360

CMBS
556

 
—

 
556

 
—

Asset-backed securities
811

 
—

 
172

 
639

Foreign government securities
276

 
—

 
276

 
—

Total fixed-maturity securities
10,588


—

 
9,508

 
1,080

Short-term investments
459

 
332

 
127

 
—

Other invested assets (1)
12

 
—

 
5

 
7

Credit derivative assets
55

 
—

 
—

 
55

FG VIEs’ assets, at fair value
1,191

 
—

 
—

 
1,191

Other assets
93

 
26

 
21

 
46

Total assets carried at fair value
$
12,398

 
$
358

 
$
9,661

 
$
2,379

Liabilities:
 

 
 

 
 

 
 

Credit derivative liabilities
$
489

 
$
—

 
$
—

 
$
489

FG VIEs’ liabilities with recourse, at fair value
1,165

 
—

 
—

 
1,165

FG VIEs’ liabilities without recourse, at fair value
119

 
—

 
—

 
119

Total liabilities carried at fair value
$
1,773

 
$
—

 
$
—

 
$
1,773

 
Fair Value Hierarchy of Financial Instruments Carried at Fair Value
As of December 31, 2015
 
 
 
 
Fair Value Hierarchy
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
(in millions)
Assets:
 

 
 

 
 

 
 

Investment portfolio, available-for-sale:
 

 
 

 
 

 
 

Fixed-maturity securities
 

 
 

 
 

 
 

Obligations of state and political subdivisions
$
5,841

 
$
—

 
$
5,833

 
$
8

U.S. government and agencies
400

 
—

 
400

 
—

Corporate securities
1,520

 
—

 
1,449

 
71

Mortgage-backed securities:
 

 
 

 
 

 
 

RMBS
1,245

 
—

 
897

 
348

CMBS
513

 
—

 
513

 
—

Asset-backed securities
825

 
—

 
168

 
657

Foreign government securities
283

 
—

 
283

 
—

Total fixed-maturity securities
10,627

 
—

 
9,543

 
1,084

Short-term investments
396

 
305

 
31

 
60

Other invested assets (1)
12

 
—

 
5

 
7

Credit derivative assets
81

 
—

 
—

 
81

FG VIEs’ assets, at fair value
1,261

 
—

 
—

 
1,261

Other assets
106

 
23

 
21

 
62

Total assets carried at fair value
$
12,483

 
$
328

 
$
9,600

 
$
2,555

Liabilities:
 

 
 

 
 

 
 

Credit derivative liabilities
$
446

 
$
—

 
$
—

 
$
446

FG VIEs’ liabilities with recourse, at fair value
1,225

 
—

 
—

 
1,225

FG VIEs’ liabilities without recourse, at fair value
124

 
—

 
—

 
124

Total liabilities carried at fair value
$
1,795

 
$
—

 
$
—

 
$
1,795

____________________
(1)
Excluded from the table above are investments funds of $45 million and $45 million as of March 31, 2016 and December 31, 2015, respectively, measured using NAV per share. Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.
Fair Value Assets Measured on Recurring Basis
Fair Value Level 3 Rollforward
Recurring Basis
First Quarter 2016
 
 
Fixed-Maturity Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
Short-Term Investments
 
FG VIEs’
Assets at
Fair
Value
 
Other
Assets (8)
 
Credit
Derivative
Asset
(Liability),
net(5)
 
FG VIEs' Liabilities
with
Recourse,
at Fair
Value
 
FG VIEs’ Liabilities
without
Recourse,
at Fair
Value
 
 
(in millions)
Fair value as of December 31, 2015
$
8

 
$
71

 
$
348

 
$
657

 

$
60

 
$
1,261

 

$
65

 

$
(365
)
 
$
(1,225
)
 
$
(124
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 
 
 
 
 
 
 

 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
0

(2
)
2

(2
)
(2
)
(2
)
1

(2
)
0

(2
)
(4
)
(3
)
(16
)
(4
)
(60
)
(6
)
21

(3
)
2

(3
)
Other comprehensive income (loss)
0

 
1

 
(5
)
 
(5
)
 

0

 
—

 

0

 

—

 

—

 

—

 

Purchases
—

 
—

 
34

 
—

 

—

 
—

 

—

 

—

 

—

 

—

 

Settlements
(1
)
 
—

 
(15
)
 
(14
)
 
(60
)
 
(66
)
 
—

 

(9
)
 

39

 

3

 

FG VIE consolidations
—

 
—

 
—

 
—

 

—

 
—

 

—

 

—

 

—

 
—

 

FG VIE deconsolidations
—

 
—

 
0

 
—

 
—

 
0

 
—

 
—

 
0

 
—

 
Fair value as of
March 31, 2016
$
7

 
$
74

 
$
360

 
$
639

 

$
—

 
$
1,191

 

$
49

 

$
(434
)
 
$
(1,165
)
 
$
(119
)
 
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2016
$
0

 
$
1

 
$
(6
)
 
$
(5
)
 
$
—

 
$
4

 
$
(16
)
 
$
(79
)
 
$
21

 
$
1

 
Fair Value Level 3 Rollforward
Recurring Basis
First Quarter 2015
 
 
Fixed-Maturity Securities
 
 
 
 
 
 
 
 
 
 
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
FG VIEs’
Assets at
Fair
Value
 
Other
Assets (8)
 
Credit
Derivative
Asset
(Liability),
net(5)
 
FG VIEs' Liabilities
with
Recourse,
at Fair
Value
 
FG VIEs’ Liabilities
without
Recourse,
at Fair
Value
 
 
(in millions)
Fair value as of December 31, 2014
$
38

 
$
79

 
$
425

 
$
228

 
$
1,398

 

$
37

 

$
(895
)
 
$
(1,277
)
 
$
(142
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
3

(2
)
2

(2
)
9

(2
)
(2
)
(2
)
23

(3
)
2

(4
)
124

(6
)
93

(3
)
(5
)
(3
)
Other comprehensive income (loss)
(2
)
 
(2
)
 
5

 
1

 
—

 

1

 

—

 

—

 

—

 

Purchases
—

 
—

 
9

 
—

 
—

 

—

 

—

 

—

 

—

 

Settlements
(31
)
(7
)
—

 
(65
)
 
(1
)
 
(30
)
 
—

 

(11
)
 

37

 

2

 

FG VIE consolidations
—

 
—

 
—

 
—

 
104

 

—

 

—

 

(131
)
 
—

 

FG VIE deconsolidations
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
March 31, 2015
$
8

 
$
79

 
$
383

 
$
226

 
$
1,495

 
$
40

 
$
(782
)
 
$
(1,278
)
 
$
(145
)
 
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2015
$
0

 
$
(2
)
 
$
7

 
$
1

 
$
34

 
$
3

 
$
103

 
$
(6
)
 
$
(4
)
 
 ____________________
(1)
Realized and unrealized gains (losses) from changes in values of Level 3 financial instruments represent gains (losses) from changes in values of those financial instruments only for the periods in which the instruments were classified as Level 3.

(2)
Included in net realized investment gains (losses) and net investment income.

(3)
Included in fair value gains (losses) on FG VIEs.

(4)
Recorded in fair value gains (losses) on CCS, net investment income and other income.

(5)
Represents net position of credit derivatives. The consolidated balance sheet presents gross assets and liabilities based on net counterparty exposure.

(6)
Reported in net change in fair value of credit derivatives.

(7)
Primarily non-cash transaction.

(8)
Includes CCS and other invested assets.
Fair Value, Liabilities Measured on Recurring Basis
Fair Value Level 3 Rollforward
Recurring Basis
First Quarter 2016
 
 
Fixed-Maturity Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
Short-Term Investments
 
FG VIEs’
Assets at
Fair
Value
 
Other
Assets (8)
 
Credit
Derivative
Asset
(Liability),
net(5)
 
FG VIEs' Liabilities
with
Recourse,
at Fair
Value
 
FG VIEs’ Liabilities
without
Recourse,
at Fair
Value
 
 
(in millions)
Fair value as of December 31, 2015
$
8

 
$
71

 
$
348

 
$
657

 

$
60

 
$
1,261

 

$
65

 

$
(365
)
 
$
(1,225
)
 
$
(124
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 
 
 
 
 
 
 

 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
0

(2
)
2

(2
)
(2
)
(2
)
1

(2
)
0

(2
)
(4
)
(3
)
(16
)
(4
)
(60
)
(6
)
21

(3
)
2

(3
)
Other comprehensive income (loss)
0

 
1

 
(5
)
 
(5
)
 

0

 
—

 

0

 

—

 

—

 

—

 

Purchases
—

 
—

 
34

 
—

 

—

 
—

 

—

 

—

 

—

 

—

 

Settlements
(1
)
 
—

 
(15
)
 
(14
)
 
(60
)
 
(66
)
 
—

 

(9
)
 

39

 

3

 

FG VIE consolidations
—

 
—

 
—

 
—

 

—

 
—

 

—

 

—

 

—

 
—

 

FG VIE deconsolidations
—

 
—

 
0

 
—

 
—

 
0

 
—

 
—

 
0

 
—

 
Fair value as of
March 31, 2016
$
7

 
$
74

 
$
360

 
$
639

 

$
—

 
$
1,191

 

$
49

 

$
(434
)
 
$
(1,165
)
 
$
(119
)
 
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2016
$
0

 
$
1

 
$
(6
)
 
$
(5
)
 
$
—

 
$
4

 
$
(16
)
 
$
(79
)
 
$
21

 
$
1

 
Fair Value Level 3 Rollforward
Recurring Basis
First Quarter 2015
 
 
Fixed-Maturity Securities
 
 
 
 
 
 
 
 
 
 
 
 
Obligations
of State and
Political
Subdivisions
 
Corporate Securities
 
RMBS
 
Asset-
Backed
Securities
 
FG VIEs’
Assets at
Fair
Value
 
Other
Assets (8)
 
Credit
Derivative
Asset
(Liability),
net(5)
 
FG VIEs' Liabilities
with
Recourse,
at Fair
Value
 
FG VIEs’ Liabilities
without
Recourse,
at Fair
Value
 
 
(in millions)
Fair value as of December 31, 2014
$
38

 
$
79

 
$
425

 
$
228

 
$
1,398

 

$
37

 

$
(895
)
 
$
(1,277
)
 
$
(142
)
 
Total pretax realized and unrealized gains/(losses) recorded in: (1)
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Net income (loss)
3

(2
)
2

(2
)
9

(2
)
(2
)
(2
)
23

(3
)
2

(4
)
124

(6
)
93

(3
)
(5
)
(3
)
Other comprehensive income (loss)
(2
)
 
(2
)
 
5

 
1

 
—

 

1

 

—

 

—

 

—

 

Purchases
—

 
—

 
9

 
—

 
—

 

—

 

—

 

—

 

—

 

Settlements
(31
)
(7
)
—

 
(65
)
 
(1
)
 
(30
)
 
—

 

(11
)
 

37

 

2

 

FG VIE consolidations
—

 
—

 
—

 
—

 
104

 

—

 

—

 

(131
)
 
—

 

FG VIE deconsolidations
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Fair value as of
March 31, 2015
$
8

 
$
79

 
$
383

 
$
226

 
$
1,495

 
$
40

 
$
(782
)
 
$
(1,278
)
 
$
(145
)
 
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2015
$
0

 
$
(2
)
 
$
7

 
$
1

 
$
34

 
$
3

 
$
103

 
$
(6
)
 
$
(4
)
 
 ____________________
(1)
Realized and unrealized gains (losses) from changes in values of Level 3 financial instruments represent gains (losses) from changes in values of those financial instruments only for the periods in which the instruments were classified as Level 3.

(2)
Included in net realized investment gains (losses) and net investment income.

(3)
Included in fair value gains (losses) on FG VIEs.

(4)
Recorded in fair value gains (losses) on CCS, net investment income and other income.

(5)
Represents net position of credit derivatives. The consolidated balance sheet presents gross assets and liabilities based on net counterparty exposure.

(6)
Reported in net change in fair value of credit derivatives.

(7)
Primarily non-cash transaction.

(8)
Includes CCS and other invested assets.
Schedule of Quantitative Information About Level 3 Assets, Fair Value Measurements
Quantitative Information About Level 3 Fair Value Inputs
At March 31, 2016

Financial Instrument Description (1)
 
Fair Value at March 31, 2016 (in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
Assets (2):
 
 

 
 
 
 
 
 
Fixed-maturity securities (3):
 
 

 
 
 
 
 
 
 
 
Corporate securities
 
$
74

 
Yield
 
20.2%
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
 
360

 
CPR
 
1.0
%
-
9.8%
 
2.8%
 
 
CDR
 
4.8
%
-
12.8%
 
9.7%
 
 
Loss severity
 
65.0
%
-
100.0%
 
78.0%
 
 
Yield
 
3.9
%
-
8.9%
 
6.0%
Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
Investor owned utility
 
71

 
Cash flow receipts

100.0%

 
 
 
Collateral recovery period
 
2.7 years
 
 
 
 
Discount factor
 
7.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Triple-X life insurance transactions
 
321

 
Yield
 
3.5
%
-
7.3%
 
4.9%
 
 
 
 
 
 
 
 
 
 
 
Collateralized debt obligations ("CDO")
 
247

 
Yield
 
15.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ assets, at fair value
 
1,191

 
CPR
 
2.5
%
-
8.6%
 
5.1%
 
 
CDR
 
1.2
%
-
23.1%
 
5.6%
 
 
Loss severity
 
40.0
%
-
100.0%
 
86.8%
 
 
Yield
 
3.5
%
-
20.9%
 
6.8%
 
 
 
 
 
 
 
 
 
 
 
Other assets
 
46

 
Quotes from third party pricing
 
$
51

-
$54
 
$53
 
 
Term (years)
 
5 years
 
 

Financial Instrument Description (1)
 
Fair Value at March 31, 2016 (in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 
 
 
 
 
 
 
Credit derivative liabilities, net
 
(434
)
 
Year 1 loss estimates
 
0.0
%
-
41.0%
 
0.8%
 
 
Hedge cost (in bps)
 
25.5

-
231.8
 
52.8
 
 
Bank profit (in bps)
 
3.8

-
1,544.4
 
112.3
 
 
Internal floor (in bps)
 
7.0

-
100.0
 
18.2
 
 
Internal credit rating
 
AAA

-
CCC
 
AA+
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ liabilities, at fair value
 
(1,284
)
 
CPR
 
2.5
%
-
8.6%
 
5.1%
 
 
CDR
 
1.2
%
-
23.1%
 
5.6%
 
 
Loss severity
 
40.0
%
-
100.0%
 
86.8%
 
 
Yield
 
3.5
%
-
20.9%
 
5.9%
___________________
(1)
Discounted cash flow is used as valuation technique for all financial instruments.

(2)
Excludes several investments recorded in other invested assets with fair value of $7 million.

(3)
Excludes obligations of state and political subdivisions investments with fair value of $7 million.

Quantitative Information About Level 3 Fair Value Inputs
At December 31, 2015

Financial Instrument Description (1)
 
Fair Value at
December 31, 2015
(in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
Assets (2):
 
 

 
 
 
 
 
 
 
 
Fixed-maturity securities (3):
 
 

 
 
 
 
 
 
 
 
Corporate securities
 
71

 
Yield
 
21.8%
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
 
348

 
CPR
 
0.3
%
-
9.0%
 
2.6%
 
 
CDR
 
2.7
%
-
9.3%
 
7.0%
 
 
Loss severity
 
60.0
%
-
100.0%
 
74.0%
 
 
Yield
 
4.7
%
-
8.2%
 
6.0%
Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
Investor owned utility
 
69

 
Cash flow receipts
 
100.0%
 
 
 
 
Collateral recovery period
 
2.9 years
 
 
 
 
Discount factor
 
7.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Triple-X life insurance transactions
 
329

 
Yield
 
3.5
%
-
7.5%
 
5.0%
 
 
 
 
 
 
 
 
 
 
 
CDO
 
259

 
Yield
 
20.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term investments
 
60

 
Yield
 
17.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ assets, at fair value
 
1,261

 
CPR
 
0.3
%
-
9.2%
 
3.9%
 
 
CDR
 
1.2
%
-
16.0%
 
4.7%
 
 
Loss severity
 
40.0
%
-
100.0%
 
85.9%
 
 
Yield
 
1.9
%
-
20.0%
 
6.4%
 
 
 
 
 
 
 
 
 
 
 
Other assets
 
62

 
Quotes from third party pricing
 
$44
-
$46
 
$45
 
 
 
Term (years)
 
5 years
 
 


 
Financial Instrument Description (1)
 
Fair Value at
December 31, 2015
(in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 
 
 
 
 
 
 
Credit derivative liabilities, net
 
(365
)
 
Year 1 loss estimates
 
0.0
%
-
41.0%
 
0.6%
 
 
 
Hedge cost (in bps)
 
32.8

-
282.0
 
66.3
 
 
 
Bank profit (in bps)
 
3.8

-
1,017.5
 
110.8
 
 
 
Internal floor (in bps)
 
7.0

-
100.0
 
16.8
 
 
 
Internal credit rating
 
AAA

-
CCC
 
AA+
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ liabilities, at fair value
 
(1,349
)
 
CPR
 
0.3
%
-
9.2%
 
3.9%
 
 
CDR
 
1.2
%
-
16.0%
 
4.7%
 
 
Loss severity
 
40.0
%
-
100.0%
 
85.9%
 
 
Yield
 
1.9
%
-
20.0%
 
5.6%

____________________
(1)
Discounted cash flow is used as valuation technique for all financial instruments.

(2)
Excludes several investments recorded in other invested assets with fair value of $7 million.

(3)
Excludes obligations of state and political subdivisions investments with fair value of $8 million.
Schedule of Quantitative Information About Level 3 Liabilities, Fair Value Measurements
Quantitative Information About Level 3 Fair Value Inputs
At March 31, 2016

Financial Instrument Description (1)
 
Fair Value at March 31, 2016 (in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
Assets (2):
 
 

 
 
 
 
 
 
Fixed-maturity securities (3):
 
 

 
 
 
 
 
 
 
 
Corporate securities
 
$
74

 
Yield
 
20.2%
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
 
360

 
CPR
 
1.0
%
-
9.8%
 
2.8%
 
 
CDR
 
4.8
%
-
12.8%
 
9.7%
 
 
Loss severity
 
65.0
%
-
100.0%
 
78.0%
 
 
Yield
 
3.9
%
-
8.9%
 
6.0%
Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
Investor owned utility
 
71

 
Cash flow receipts

100.0%

 
 
 
Collateral recovery period
 
2.7 years
 
 
 
 
Discount factor
 
7.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Triple-X life insurance transactions
 
321

 
Yield
 
3.5
%
-
7.3%
 
4.9%
 
 
 
 
 
 
 
 
 
 
 
Collateralized debt obligations ("CDO")
 
247

 
Yield
 
15.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ assets, at fair value
 
1,191

 
CPR
 
2.5
%
-
8.6%
 
5.1%
 
 
CDR
 
1.2
%
-
23.1%
 
5.6%
 
 
Loss severity
 
40.0
%
-
100.0%
 
86.8%
 
 
Yield
 
3.5
%
-
20.9%
 
6.8%
 
 
 
 
 
 
 
 
 
 
 
Other assets
 
46

 
Quotes from third party pricing
 
$
51

-
$54
 
$53
 
 
Term (years)
 
5 years
 
 

Financial Instrument Description (1)
 
Fair Value at March 31, 2016 (in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 
 
 
 
 
 
 
Credit derivative liabilities, net
 
(434
)
 
Year 1 loss estimates
 
0.0
%
-
41.0%
 
0.8%
 
 
Hedge cost (in bps)
 
25.5

-
231.8
 
52.8
 
 
Bank profit (in bps)
 
3.8

-
1,544.4
 
112.3
 
 
Internal floor (in bps)
 
7.0

-
100.0
 
18.2
 
 
Internal credit rating
 
AAA

-
CCC
 
AA+
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ liabilities, at fair value
 
(1,284
)
 
CPR
 
2.5
%
-
8.6%
 
5.1%
 
 
CDR
 
1.2
%
-
23.1%
 
5.6%
 
 
Loss severity
 
40.0
%
-
100.0%
 
86.8%
 
 
Yield
 
3.5
%
-
20.9%
 
5.9%
___________________
(1)
Discounted cash flow is used as valuation technique for all financial instruments.

(2)
Excludes several investments recorded in other invested assets with fair value of $7 million.

(3)
Excludes obligations of state and political subdivisions investments with fair value of $7 million.

Quantitative Information About Level 3 Fair Value Inputs
At December 31, 2015

Financial Instrument Description (1)
 
Fair Value at
December 31, 2015
(in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
Assets (2):
 
 

 
 
 
 
 
 
 
 
Fixed-maturity securities (3):
 
 

 
 
 
 
 
 
 
 
Corporate securities
 
71

 
Yield
 
21.8%
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
 
348

 
CPR
 
0.3
%
-
9.0%
 
2.6%
 
 
CDR
 
2.7
%
-
9.3%
 
7.0%
 
 
Loss severity
 
60.0
%
-
100.0%
 
74.0%
 
 
Yield
 
4.7
%
-
8.2%
 
6.0%
Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
Investor owned utility
 
69

 
Cash flow receipts
 
100.0%
 
 
 
 
Collateral recovery period
 
2.9 years
 
 
 
 
Discount factor
 
7.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Triple-X life insurance transactions
 
329

 
Yield
 
3.5
%
-
7.5%
 
5.0%
 
 
 
 
 
 
 
 
 
 
 
CDO
 
259

 
Yield
 
20.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term investments
 
60

 
Yield
 
17.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ assets, at fair value
 
1,261

 
CPR
 
0.3
%
-
9.2%
 
3.9%
 
 
CDR
 
1.2
%
-
16.0%
 
4.7%
 
 
Loss severity
 
40.0
%
-
100.0%
 
85.9%
 
 
Yield
 
1.9
%
-
20.0%
 
6.4%
 
 
 
 
 
 
 
 
 
 
 
Other assets
 
62

 
Quotes from third party pricing
 
$44
-
$46
 
$45
 
 
 
Term (years)
 
5 years
 
 


 
Financial Instrument Description (1)
 
Fair Value at
December 31, 2015
(in millions)
 
Significant Unobservable Inputs
 
Range
 
Weighted Average as a Percentage of Current Par Outstanding
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 
 
 
 
 
 
 
Credit derivative liabilities, net
 
(365
)
 
Year 1 loss estimates
 
0.0
%
-
41.0%
 
0.6%
 
 
 
Hedge cost (in bps)
 
32.8

-
282.0
 
66.3
 
 
 
Bank profit (in bps)
 
3.8

-
1,017.5
 
110.8
 
 
 
Internal floor (in bps)
 
7.0

-
100.0
 
16.8
 
 
 
Internal credit rating
 
AAA

-
CCC
 
AA+
 
 
 
 
 
 
 
 
 
 
 
FG VIEs’ liabilities, at fair value
 
(1,349
)
 
CPR
 
0.3
%
-
9.2%
 
3.9%
 
 
CDR
 
1.2
%
-
16.0%
 
4.7%
 
 
Loss severity
 
40.0
%
-
100.0%
 
85.9%
 
 
Yield
 
1.9
%
-
20.0%
 
5.6%

____________________
(1)
Discounted cash flow is used as valuation technique for all financial instruments.

(2)
Excludes several investments recorded in other invested assets with fair value of $7 million.

(3)
Excludes obligations of state and political subdivisions investments with fair value of $8 million.
Fair Value of Financial Instruments
Fair Value of Financial Instruments
 
 
As of
March 31, 2016
 
As of
December 31, 2015
 
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
 
(in millions)
Assets:
 

 
 

 
 

 
 

Fixed-maturity securities
$
10,588

 
$
10,588

 
$
10,627

 
$
10,627

Short-term investments
459

 
459

 
396

 
396

Other invested assets (1)
150

 
152

 
150

 
152

Credit derivative assets
55

 
55

 
81

 
81

FG VIEs’ assets, at fair value
1,191

 
1,191

 
1,261

 
1,261

Other assets
211

 
211

 
206

 
206

Liabilities:
 

 
 

 
 

 
 

Financial guaranty insurance contracts (2)
3,804

 
9,500

 
3,998

 
8,712

Long-term debt
1,302

 
1,500

 
1,300

 
1,512

Credit derivative liabilities
489

 
489

 
446

 
446

FG VIEs’ liabilities with recourse, at fair value
1,165

 
1,165

 
1,225

 
1,225

FG VIEs’ liabilities without recourse, at fair value
119

 
119

 
124

 
124

Other liabilities
73

 
73

 
9

 
9

____________________
(1)
Includes investments not carried at fair value with a carrying value of $93 million and $93 million as of March 31, 2016 and December 31, 2015, respectively. Excludes investments carried under the equity method.

(2)
Carrying amount includes the assets and liabilities related to financial guaranty insurance contract premiums, losses, and salvage and subrogation and other recoverables net of reinsurance.